Vanguard ETFs: Simplifying Your Investment Journey

Investing can be straightforward. If you prefer a hands-off approach, Vanguard provides a variety of exchange-traded funds (ETFs) that can establish a strong investment foundation.

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Here, we delve into two Vanguard ETFs that are particularly appealing for investors who want a set-and-forget style.

Vanguard S&P 500 ETF: Your Gateway to U.S. Market

The Vanguard S&P 500 ETF (NYSEMKT: VOO) mirrors the S&P 500 index, giving investors access to 500 of the largest companies in the United States. Passive investors favor this ETF for its extensive market coverage at an exceptionally low cost.

VOO data by YCharts

With an expense ratio of just 0.03%, the Vanguard S&P 500 ETF is one of the most affordable options for investing in the U.S. stock market. This low fee allows more of your money to remain invested and working for you. Since its inception, this fund has yielded a total return of 592%, surpassing many actively managed funds.

The ETF’s top three holdings include tech giants like Apple, Microsoft, and Nvidia, which together comprise nearly 20% of the fund’s assets. This tech concentration has been crucial in driving the fund’s growth over recent years.

Vanguard Total Bond Market Index Fund: Ensuring Portfolio Stability

While stocks are linked to potential growth, bonds can offer stability and yield. The Vanguard Total Bond Market Index Fund (NASDAQ: BND) provides broad access to U.S. investment-grade bonds, incorporating Treasuries and mortgage-backed securities of all types. This makes it a solid option for a core bond investment.

BND data by YCharts

This bond ETF matches the equity fund with a low expense ratio of 0.03%, notably below the average expense ratio of 0.56% for similar offerings. Consequently, its low costs allow it to effectively track the Bloomberg U.S. Aggregate Float Adjusted Index, a broad measure of the U.S. investment-grade bond market.

As of September 30, 2024, the fund held 11,341 bonds with an average effective maturity of 8.3 years and an average duration of 6.0 years, indicating a moderate sensitivity to interest rate changes. Its yield to maturity stands at 4.2%, contributing a steady income stream for investors.

Warren Buffett’s Strategy: A Proven Path

This combination of ETFs aligns well with Warren Buffett’s well-known 90/10 investment strategy. He suggests allocating 90% of investments to low-cost S&P 500 index funds and 10% to short-term government bonds. This mix aims to harness the long-term growth prospects of the U.S. economy while cushioning against market fluctuations.

Buffett’s support for this strategy arises from his belief that, over time, the stock market outperforms other kinds of investments. He observes that many active money managers find it challenging to consistently outperform the S&P 500, making these low-cost index funds an appealing choice for investors.

The Ideal Set-and-Forget Investment Strategy

For those who want to “set and forget” their investments, these Vanguard ETFs present an excellent option. The Vanguard S&P 500 ETF captures the growth of America’s largest companies, while the Vanguard Total Bond Market Index Fund cushions your portfolio with stability and income.

Both ETFs boast exceptionally low expense ratios, allowing more of your money to remain invested for compound growth over time. Their broad diversification lessens the risk that any single company’s poor performance will significantly harm your entire portfolio.

Adopting a set-and-forget strategy doesn’t imply carelessness. It involves selecting a robust, long-term investment plan and adhering to it. By consistently investing in these Vanguard ETFs, you position yourself to benefit from the long-term growth of the U.S. economy while keeping your portfolio balanced and diversified. This approach is a simple yet effective strategy that has proven successful over the years.

Opportunity Knocks: Don’t Miss Your Chance

Ever worried about missing out on strong stock investments? You’ll want to pay attention.

Our expert analysts occasionally issue a “Double Down” stock recommendation for companies they predict are primed for significant growth. If you think you may have missed an opportunity to invest, now could be the right moment to act before it’s too late. These numbers illustrate the potential:

• Amazon: An investment of $1,000 when we doubled down in 2010 would be worth $21,285!
• Apple: A $1,000 investment when we doubled down in 2008 would now be $44,456!
• Netflix: Invest $1,000 when we doubled down in 2004, and you’d see it grow to $411,959!

Currently, we’re issuing “Double Down” alerts for three outstanding companies, and opportunities like this may not come again soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 21, 2024

George Budwell has positions in Apple, Microsoft, Nvidia, Vanguard S&P 500 ETF, and Vanguard Total Bond Market ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Vanguard S&P 500 ETF, and Vanguard Total Bond Market ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.